WHAT'S GOING ON IN BANKING - 2022 Rebounding From the Revenue Recession
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
WHAT’S
GOING ON
IN BANKING
2022
Rebounding From the
Revenue Recession
Community-Based Financial Institutions’
Priorities, Plans, and Plaints
Ron Shevlin | Chief Research Officer | Cornerstone AdvisorsTABLE OF CONTENTS
Executive Summary................................................................................................1
The Outlook for 2022............................................................................................ 2
Bank and Credit Union Executives’ Outlook........................................... 2
Concerns and Threats........................................................................................... 5
New Products: Real-Time Payments and Cryptocurrency......................9
M&A Outlook........................................................................................................... 15
Lending Priorities.................................................................................................. 15
Payments and Deposits Priorities................................................................. 20
Technology Priorities and Plans......................................................................22
Technology Priorities.......................................................................................22
Technology Spending.................................................................................... 24
Emerging Technologies................................................................................. 24
New System Selection and Replacement..............................................27
Digital Transformation........................................................................................ 30
Digital Transformation Impact.................................................................... 31
Vendor Support for Digital Transformation Efforts...........................33
Digital Transformation Delusions...............................................................35
2022: Rebounding From the Revenue Recession...................................37
About the Data...................................................................................................... 41
Endnotes ................................................................................................................... 41
About the Author................................................................................................. 42
About Cornerstone Advisors.......................................................................... 42
©2022 Cornerstone Advisors. All rights reserved.EXECUTIVE SUMMARY
WHAT
SO
• 2022 will be the year of the revenue recession rebound. On a number of fronts,
banks’ and credit unions’ revenue-generating efforts are getting hammered. It’s
a trend that’s been growing over the past few years, but with the overdraft fee
overhaul that will hit the industry in 2022, non-interest income will become a top
focus for financial institutions.
• The economy—once again—is a question mark. Among bank and credit union execs,
optimists outnumber the pessimists. But the pessimists might have a more compelling
story. The end of the Paycheck Protection Program (PPP), non-transitory inflation,
talent attraction and retention challenges, excess liquidity, and increasing regulatory
burdens all add up to create significant challenges for the industry in 2022. At least
we won’t have to deal with Omarova.
• Real-time payments take center stage. Three in 10 banks and a quarter of credit
unions plan to implement real-time payments in 2022. Many of the institutions planning
to launch in 2022 haven’t determined their strategy yet but are opening the door for
vendors with real-time payment solutions and putting pressure on The Clearing House to
accelerate new client implementations in 2022 before FedNow’s planned launch in 2023.
• Crypto begins its march to mainstream status. About one in 10 financial institutions
plans to introduce cryptocurrency investing/trading services in 2022. That’s not a
particularly large percentage, but it’s a start—especially considering that another 13%
plan to launch the service in 2023. Consumers want cryptocurrency from their banks.
The reasons (i.e., excuses) for not providing the capabilities don’t hold water anymore.
• Digital transformation needs a reset. We can’t predict that digital transformation
efforts will get reset in 2022—but they need to. Banks and credit unions are deluding
themselves into thinking they’re further along in their journey than they really are and
that their efforts are having the impact they think they’re having.
• Chatbots heat up. The percentage of financial institutions that deployed chatbots in
2021 grew significantly, and the percentage that plan to deploy the technology in 2022
will accelerate that adoption. It’s about time. Banks and credit unions need chatbots—
or better yet, conversational AI tools—to improve their data collection efforts.
• Digital account opening systems are still hot. For the past four or five years, digital
account opening systems have been at the top of financial institutions’ list of planned
new selections/replacements. What’s taking the industry so long to get this done?
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 1THE OUTLOOK FOR 2022
BANK AND CREDIT UNION EXECUTIVES’ OUTLOOK
What do bank and credit union executives think about 2022?
The optimists outnumber the pessimists. A little more than four in 10 survey respondents are “somewhat”
or “much more” optimistic about 2022 than they were going into 2021, while just one in five expressed a
pessimistic view about the coming year (Figure 1).
FIGURE 1: Outlook for 2022
Relative to 2021, how optimistic are you about the prospects for
the banking industry (not just your institution) in 2022?
9% 33% 40% 19% 1%
Much more Somewhat more I think it will be much Somewhat more Much more
optimistic optimistic like it was in 2021 pessimistic pessimistic
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
Among our survey respondents, optimistic executives had this to say:
“Consumers are settling into our new normal with COVID and new variants being a part of our lives for the
near future. There is significant pent-up demand with consumers who are ready to get back to traveling,
buying goods and services, etc., that will come to fruition in 2022 if the supply chain issues are resolved.
I’m optimistic the opportunity for auto lending will help drive portfolio growth in 2022, but competition
will be fierce, and we will need to make the financing process seamless for our members.”
— Jenna Lampson, President/CEO, Pacific Service Credit Union, Concord, California
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 2“We are approaching the Golden Age of banking—wider margins, good credit, low cost of funds, a rally
in bank equity and the application of technology that can make a difference.”
— Chris Nichols, Director, SouthState Bank, San Francisco, California
“The Fed has announced tapering will occur over the next year. We’re seeing some much-needed inflation,
which should help make the case for an increase in interest rates sooner rather than later. Combine these with
the further extinguishment of stimulus measures that have been killing off organic lending opportunities, and
we just might see a decent year ahead of us.”
— Tom Moran, President, Community Bank, Walla Walla, Washington
“While margin pressure and the loss of the PPP pop to earnings can cause less optimism, we are growing
our LPOs/commercial lenders to expand our commercial footings and markets—that is a spark for our
company and outlook.”
— Bill Cable, Chief Operating Officer, People’s Bank, Newton, North Carolina
“I’m optimistic that spending will increase in 2022. Travel sectors are returning to normal, and we should
see a growing inventory of vehicles. Remote work has proved to be a great alternative for employees;
productivity was our highest in 2021. While many credit unions are calling employees back to the office,
we are supporting the remote work option for all non-branch positions. This requires new and more
innovative ways to maintain a cohesive culture, but it keeps us agile.”
— Geri LaChance, President/CEO, SESLOC Federal Credit Union, San Luis Obispo, California
“As consumers settle into how to deal with things longer-term coming out of the pandemic, they will
adopt and exhibit longer-term behaviors in the areas of spending, borrowing, savings, and planning.”
— Martin Carter, President/CEO, Astera Credit Union, Lansing, Michigan
“I’m very optimistic because: 1) businesses recovering and workers returning to work will continue
to spur investment and borrowing; 2) the rising rate environment will help credit unions lengthen
their portfolios; and 3) affordability of tech is allowing smaller credit unions to modernize and
streamline their operations.“
— Frank Wasson, Chief Executive Officer, CommonWealth One Federal Credit Union, Alexandria, Virginia
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 3On the other side of the coin, execs explained why they’re pessimistic:
“Inflation will become more of an issue for most consumers. The probability of rising interest rates will curtail
mortgage lending and there will be no stimulus dollars next year to supplement the consumers pocketbook.
Any one of these could lead to lower economic expectations in 2022.”
— Alan Renfroe, President/CEO, First Federal Savings and Loan Association of Pascagoula, Moss Point, Mississippi
“The PPP money had a very positive impact on institutions. That will be absent in the upcoming year and
banks will scramble to find other sources of revenue.”
— Christa Owen, Chief Compliance Officer, Farmers National Bank, Danville, Kentucky
“Competition is pushing down lending rates and underwriting is moving towards more risky loans.
Personnel costs are going up and compliance/technology investments are becoming a drag on earnings.”
— Russell Rosendal, President/CEO, Salal Credit Union, Seattle, Washington
“The trifecta of renewed regulatory pressure by an enforcement regime, interest rate environment
(margin compression), and wage pressure due to inflation render 2022 seriously challenging.”
— Len Devaisher, President and CEO, MidWestOne Bank, Iowa City, Iowa
“Margins will get even tighter, and banks will need to spend capital for automation, not just look for
incremental process improvements.”
— Kim Compton, Chief Strategy Officer, The Farmers Bank, Westfield, Indiana
“We still expect loan losses and bankruptcies to pick up as consumers assess the degree of financial
wreckage and are expected to resume normal payment patterns. There will likely be a lot of suppressed
payment problems and bankruptcies.”
— Jonathan Krieps, Chief Operations Officer, North State Bank, Raleigh, North Carolina
“I have concerns about loan loss escalating as the year progresses and about the long-term effects of
remote work as productivity begins to wane.”
— Andy Grimm, President/CEO, Apple Federal Credit Union, Fairfax, Virginia
“Too much liquidity in a low-rate environment will not produce enough revenue relative to previous years.”
— Jim Marcuccilli, Chairman & CEO, STAR Financial Bank, Fort Wayne, Indiana
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 4CONCERNS AND THREATS
The big news for both banks and credit unions in 2022 is the jump in the percentage of executives concerned
about their ability to attract qualified talent. Among bank respondents, 67% listed this as a top concern for
2022, up from 19% in 2021 (Table A). Among credit union respondents, 63% mentioned attracting talent as
a concern, up from 19% in 2021 (Table B).
TABLE A: Bank Execs’ Top Concerns, 2020 to 2022
2020 2021 2022
Ability to attract qualified talent 27% 19% 67%
Cybersecurity 23% 28% 51%
Interest rate environment 43% 56% 50%
Regulatory burden 22% 18% 44%
Efficiency, non-interest expenses, costs 32% 36% 39%
Weak economy/loan demand 24% 48% 36%
Non-interest income 11% 17% 29%
New customer growth 25% 25% 28%
Cost of funds 15% 8% 8%
Credit quality/problem loans 10% 42% 6%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 5TABLE B: Credit Union Execs’ Top Concerns, 2020 to 2022
2020 2021 2022
Ability to attract qualified talent 19% 19% 63%
Cybersecurity 19% 26% 43%
New membership growth 43% 40% 41%
Non-interest income 10% 27% 39%
Regulatory burden 16% 20% 39%
Interest rate environment 32% 53% 38%
Weak economy/loan demand 34% 57% 34%
Efficiency, non-interest expenses, costs 34% 25% 33%
Cost of funds 13% 8% 9%
Credit quality/problem loans 9% 33% 4%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
Concerns regarding an ability to attract qualified talent were reflected in comments like this one from one of
the survey respondents:
“We’re concerned about finding and recruiting quality relationship managers that can understand both
the deposit and lending sides of the bank in order to offer a client a complete banking relationship. Silo
marketing just doesn’t work for higher net worth clients.”
Regulatory concerns are heating up from past years, as 44% of banks and 39% of credit unions cited this as
a concern for 2022, again, a big increase from 2021 for both groups. Respondents had this to say about the
regulatory burden:
“The government regulation impact is huge—the possibility of IRS reporting for certain transactions on a
mass level is frightening.”
“I have concerns about the regulatory agencies’ focus in the coming years. For example, climate change
regulation is one of their top priorities. These changes are directed at the larger financial institutions, but
they always find their way down to the smallest of institutions.”
“Just say no to Omarova!”
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 6The focus on cybersecurity is growing, as well. Only about a quarter of respondents put cybersecurity in their
list of top concerns going into 2021. Heading into 2022, however, 51% of bankers and 43% of credit union execs
cite cybersecurity as a top concern.
Bank and credit union executives’ views of the competitive landscape continue to shift. The percentage of execs
who see the Big Tech firms—e.g., Apple, Amazon, Google—as significant threats declined from 61% in 2020 to 49%
in 2021 and drops to 35% in 2022. On the other hand, the percentage of respondents who see fintech companies
like Square and PayPal as significant threats has increased from 36% in 2021 to 47% in 2022 (Figure 2).
FIGURE 2: Competitive Threats
Percentage of Bank and Credit Union Executives Who See the Following
Types of Companies as Significant Threats in the Coming Decade
47%
Fintech (e.g., Credit Karma, PayPal, Square)
36%
35%
Big Tech (e.g., Amazon, Apple, Google)
49%
34%
Megabanks
36%
33%
Challenger banks (e.g., Chime, Varo)
28%
22%
Credit unions
23%
2022
2021
18%
Community banks
18%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2020-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 7Survey respondents told us:
“Is traditional banking dead? Given all the focus around fintech, it’s a matter of time before digital
loans come into effect and, with adequate regulation, fintech challenges traditional banking.”
“Partner up or get bullied out by Square, Google, Amazon, Facebook, and Apple.”
The shift in perceptions is spot on.
Google may have killed its planned Plex checking account product—leaving its bank and credit union
would-be partners in the lurch—but the initiative sent a signal to financial institutions that it’s more
interested in partnering with (i.e., selling to) financial institutions than in disrupting them.
The Amazon threat seems overplayed, as well, as it has partnered with Goldman Sachs’ Marcus unit
to provide small business loans and merchant cash advances, and leaked wireframe designs of a
marketplace that would enable other banks to compete for that business.
Meanwhile, Square (oops, we mean Block) has become a banking powerhouse with its consumer and
merchant network; PayPal is embarking on a “super app” strategy; and other large fintechs like Shopify,
Intuit, and Credit Karma threaten incumbent financial institutions’ positions in the market.
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 8NEW PRODUCTS: REAL-TIME
PAYMENTS & CRYPTOCURRENCY
New product development will heat up among credit unions in 2022, as nearly seven in 10 of them have plans
to launch new products or services, up from 50% in 2021. Activity among banks promises to be just as lively
in 2022 as it was in 2021, with more than half planning new product launches (Figure 3).
FIGURE 3: New Product/Service Plans
Percentage of Financial Institutions Planning to Launch New Products/Services
69%
58% 57%
50%
2021
2022
Banks Credit Unions
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2020-2021
Two new product/service offerings — real-time payments (RTP) and cryptocurrency investing — will gain
traction in 2022.
Three in 10 banks and a quarter of credit unions plan to implement real-time payments in 2022. This represents
a 120% increase over the number of banks that have already rolled out RTP and 50% growth for credit unions.
Looking ahead to 2023, adoption of RTP promises to stay hot (Figure 4).
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 9FIGURE 4: Real-Time Payments Implementation Plans
When does your organization plan to implement real-time payments (RTP)?
31% 30%
26%
24% 23% 23%
16%
14%
6% 7%
We've already launched RTP 2022 2023 2024 or later Don’t know
Banks Credit Unions
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
How will financial institutions go about deploying RTP? Many don’t yet—37% of banks and 42% of credit unions
said they haven’t determined their RTP strategy. About a quarter of banks and one in five credit unions say
they’ll wait for FedNow to deploy before rolling out real-time payments (Table C).
TABLE C: RTP Approach
Which statement best describes your organization’s approach to providing RTP?
Banks Credit Unions
We haven’t determined our RTP strategy 37% 42%
We will wait for FedNow to deploy 27% 21%
We will deploy both The Clearing House and FedNow 18% 6%
We have deployed The Clearing House’s solution 7% 6%
We have already deployed another vendor’s solution 7% 10%
We plan to deploy The Clearing House’s solution 2% 4%
We plan to deploy another vendor’s solution 2% 11%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 10Business-to-business (B2B) payments and account-to-account (A2A) transfers were the most-frequently cited
use cases by banks. Among credit unions, A2A transfers, recurring bill pay, and last-minute consumer payments
were the most-frequently mentioned use cases (Table D).
TABLE D: RTP Use Cases
What are — or will be — the 3 most important use cases for your organization’s RTP strategy?
Banks Credit Unions
B2B payments 54% 16%
A2A transfers 42% 62%
Payroll (or expedited payroll) payments 36% 22%
Recurring bill pay 30% 41%
Last-minute consumer payment 22% 40%
Ad-hoc bill pay 19% 25%
Consumer retail purchases 15% 16%
eCommerce 10% 12%
Sweep account 10% 10%
B2C disbursements (e.g., rebates, returns) 9% 4%
Government tax and fee payments 3% 2%
Cash pooling/concentration 3% 1%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
Cornerstone Advisors Senior Director of Payments Tony DeSanctis observes:
“The use cases center on B2B and B2C for real-time payments. Whether companies pay employees,
customers, or vendors, the primary benefit of faster payments is getting money out faster than checks
and ACH. Cards continue to be the primary solution for C2B [consumer to business]. While real-time
offers benefits to commercial clients, it is more important to have a robust cash management offering
that replaces manual and paper processes with automated, integrated, and real-time data and processes.”
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 11Risk is at the top of both banks’ and credit unions’ concerns for real-time payments, followed by cost
and core functionality (Table E).
TABLE E: RTP Concerns
Which of the following are — or will be — the most important concerns for
your organization’s real-time payment strategy? (select up to three)
Banks Credit Unions
Risk 61% 53%
Cost 43% 30%
Core functionality 38% 34%
Implementation burden 25% 23%
Embedded risk controls 21% 30%
Network governance/ownership 15% 6%
Number of providers 14% 12%
Network reach 10% 8%
Payment limits 10% 9%
Breadth of 3rd-party support 9% 11%
Brand recognition 3% 11%
Connectivity burden 2% 7%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
According to SouthState’s Chris Nichols:
“The number of new products that can be spun off of RTP can make an innovator’s head spin. It’s the data
in the messaging of RTP that will alter a bank’s trajectory. While instantaneous payments are life altering,
it’s the data in the messaging of RTP that will alter a bank’s trajectory. Another reason why RTP is
important is that it is a gateway drug to the crypto rails.”
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 12Speaking of cryptocurrency, roughly one in 10 banks and credit unions plans to launch cryptocurrency investing/
trading services in 2022. Today, just 1% (and that’s rounding up) of banks offer the service and virtually no credit
unions do. Among banks, 7% plan to offer cryptocurrency rewards and 8% will provide crypto custody and
safekeeping services (Figure 5). Among credit unions, 5% expect to offer crypto custody and safekeeping
services (Figure 6).
FIGURE 5: Banks’ Cryptocurrency Plans
Which best characterizes what your organization is doing (or has
done) with the following cryptocurrency-related services?
Cryptocurrency investing/trading 11% 10% 78% 1%
Cryptocurrency rewards 7% 9% 84% 1%
USD settlement for cryptocurrency firms 7% 9% 84% 1%
Cryptocurrency custody/safekeeping 8% 9% 83%
Cryptocurrency lending 4% 95%
1%
Will offer in 2022 Will offer in 2023 or later No plans to offer Already offer
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
FIGURE 6: Credit Unions’ Cryptocurrency Plans
Which best characterizes what your organization is doing (or has done)
with the following cryptocurrency-related services?
Cryptocurrency investing/trading 9% 16% 76%
Cryptocurrency custody/safekeeping 5% 12% 84%
USD settlement for cryptocurrency firms 2% 9% 88% 1%
Cryptocurrency rewards 2% 11% 88%
Cryptocurrency lending 5% 95%
1%
Will offer in 2022 Will offer in 2023 or later No plans to offer Already offer
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 13According to Cornerstone Advisors Partner Quintin Sykes:
“Despite receiving positive guidance on cryptocurrency activities from regulators in 2021, financial
institutions largely remain on the crypto sideline. For credit unions, partnering with a firm like NYDIG or
Bakkt to offer cryptocurrency trading is the most likely path. Banks also see an opportunity to offer
custody/safekeeping and USD settlement activities offered by banks like Silvergate and Signature today.”
There are crypto-skeptics among bank and credit union execs. Two survey respondents commented:
“Why are there more cryptocurrencies than U.S. banks and credit unions combined? When is the consolidation
and fallout going to occur? Who will be the winners/losers?”
“I would like to see less focus on crypto and how consumers are demanding it be used for ALL things.
It’s not stable enough to be a legit payment mechanism as the value could fluctuate during the transaction.
Instead of pushing crypto ATMs and ways to create your own currencies, it would be great to see more
focus on how to solve issues like unaffordable housing and the student loan crisis and start making banking
products and services that work for the upcoming generations.”
Another respondent, however, remarked:
“We need to accept that cryptocurrency is here and we should be planning TODAY on how we will
approach this topic and not wait until it’s too late and we are reacting versus planning.”
Cornerstone agrees with the latter comment. Granted, the numbers don’t quite portend an onslaught of
banks getting into crypto, but we anticipate faster adoption in 2022 due to:
• Demand. According to a Cornerstone Advisors survey of U.S. consumers, 60% of crypto owners would
use their bank to invest in cryptocurrencies. Just 4% of current crypto owners said they wouldn’t use
their bank to invest in crypto because they wouldn’t switch from the exchange they currently use.
• Supply. The Big 3 bank tech vendors—FIS, Fiserv, and Jack Henry—have all partnered with NYDIG,
making it easy (OK, easier) for mid-size institutions to integrate crypto services into their core and
digital banking platforms. The payment networks are getting into the act, as well. Visa announced
the launch of a crypto advisory service for its banking and merchant clients.
• Pressure. Banks and credit unions will experience: 1) FOMO as they see their peers jumping on the crypto
bandwagon, and 2) pressure from board members who will tell their management teams about their
grandchildren’s Bitcoin investments and want to know how the institution plans to respond.
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 14M&A OUTLOOK
According to Bloomberg:1
“U.S. banks, which have been combining at levels not seen since before the global financial crisis, are now
facing the near-term hurdles of stalled approvals and mounting opposition from Democrats in Washington.
All of that is unlikely to keep the string of deals from ultimately continuing. Anemic loan growth and
competition from larger or more technologically savvy rivals are likely to force banks to keep seeking
out combinations even amid the obstacles.”
Our survey respondents tend to agree. More than half of bank execs and nearly two-thirds of credit union execs
expect the environment to be more favorable for deals in 2022. Just a handful expect it to be less favorable
(Figure 7).
FIGURE 7: M&A Outlook for 2022
What are the prospects for M&A activity in the banking industry in 2022 compared to 2021?
5% 4%
33%
39%
Less favorable for deals
No more or less favorable for deals
More favorable for deals
63%
56%
Banks Credit Unions
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
Roughly a third of bank and credit union execs said they’re either “somewhat” or “highly” likely to make an
acquisition in 2022 (Figure 8). Very few respondents anticipate that their institution will be acquired in 2022,
however (Figure 9).
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 15FIGURE 8: Acquisition Expectations
How likely is your institution to acquire another institution in 2022?
9% 6%
26%
42% Don’t know
Highly unlikely
36% Somewhat unlikely
Somewhat likely
20%
Highly likely
21% 22%
9% 11%
Banks Credit Unions
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
FIGURE 9: Expectations To Be Acquired
How likely is your institution to be acquired by another institution in 2022?
7% 2%
Don’t know
Highly unlikely
74%
88% Somewhat unlikely
Somewhat likely
Highly likely
12% 6%
5% 2% 1% 3%
Banks Credit Unions
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 16Growth opportunities, market expansion, and economies of scale are the predominant drivers of M&A activity
for both banks and credit unions (Table F).
TABLE F: M&A Drivers
What are your organization’s primary drivers for seeking an acquisition or merger, or being acquired?
Banks Credit Unions
Growth opportunities 70% 85%
Market expansion 68% 72%
Economies of scale 62% 61%
Revenue recession 16% 2%
Succession planning 14% 7%
Regulatory costs 10% 4%
Obtain funds for capital investment 4% 4%
Other 4% 4%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
According to Cornerstone Advisors Managing Director Vincent Hui:
“The revenue recession continues to drive industry consolidation through cost efficiencies via economies of
scale and/or inorganic growth to offset depressed loan volumes in existing markets. Interestingly, most financial
institutions don’t see themselves involved in a transaction. This suggests that valuations are too rich, currency
to do deals (e.g., stock) is depressed, and/or institutions can’t spare resources from key initiatives like digital
transformation—meaning the most well-run institutions (as reflected in stock valuation) will be at an advantage
in the merger environment and will get even stronger.”
John Meyer, Senior Director at Cornerstone, adds:
“Rohit Chopra, the new head of the CFPB, is pushing the agency to focus on Fair Lending regulation including
the Equal Credit Opportunity Act, the Fair Housing Act, and the Consumer Financial Protection Act in 2022.
This means that there will be extra scrutiny on branch closures as a means for generating non-interest expense
savings post acquisition. Regulatory burden concerns jumped 26% year-over-year to land in the top five
concerns for bankers, which is a problem for smaller banks as they just cannot keep up with the new pressures.
Couple that concern with the fact that no 2021 M&A deals greater than $1B in deal value have been approved
by regulators as of yet, and 2022 is shaping up for more deal activity in the sub $1B segment.”
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 17LENDING PRIORITIES
Commercial and industrial (C&I) loans stay at the top of the list of banks’ lending priorities for 2022, although
the percentage of respondents listing them as a high priority continues to decline. The big priority shifts
between 2021 and 2022 will be for home equity loans, which were cited as a priority by twice as many banks
for 2022 than for 2021, and in loan participations, listed as a high priority by three times as many banks in 2022
versus 2021 (Table G).
TABLE G: Banks’ Lending Priorities, 2020-2022
Percentage of Banks Citing Loan Type as a High Priority
2020 2021 2022
Commercial C&I loans 70% 63% 57%
Small business loans 66% 60% 56%
Commercial real estate loans 76% 45% 53%
Mortgage/refi loans 56% 47% 37%
Home equity loans/lines of credit 39% 9% 20%
Loan participations NA 5% 15%
Auto loans 13% 6% 9%
Other personal loans 15% 5% 6%
POS/BNPL loans 3% 1% 5%
Student loans 1% 0% 1%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 18As with prior years, mortgages and auto loans are top lending priorities for credit unions. Small business and
commercial loans increase in importance to credit unions for 2022 after a decline from 2020 to 2021 (Table H).
TABLE H: Credit Unions’ Lending Priorities, 2020-2022
Percentage of Credit Unions Citing Loan Type as a High Priority
2020 2021 2022
Mortgage/refi loans 84% 79% 75%
Auto loans 69% 72% 63%
Home equity loans/lines of credit 64% 41% 56%
Commercial real estate loans 57% 30% 45%
Small business loans 33% 23% 34%
Loan participations NA 16% 27%
Other personal loans 43% 16% 21%
Commercial C&I loans 21% 6% 20%
POS/BNPL loans 5% 3% 6%
Student loans 12% 1% 1%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 19PAYMENTS AND
DEPOSITS PRIORITIES
With the influx of deposits resulting from the pandemic and government stimulus programs, retail deposits
continue to decline as a high priority for banks. The focus shifts to revenue growth as debit card interchange
and commercial treasury management income are cited as high priorities by a growing percentage of banks
(Figure 10).
FIGURE 10: Banks’ Payments and Deposits Priorities for 2022
Percentage of Banks Citing Payments or Deposit Type as a High Priority
44%
Debit card interchange income
33%
44%
Commercial treasury management income
33%
41%
Small business deposit account volume
45%
41%
Small business deposits
57%
40%
Large commercial deposit account volume
25%
39%
Consumer checking account volume
30%
38%
Large commercial deposits
36%
21%
Retail deposits
35%
18% 2022
Credit card interchange income
4% 2021
17%
Credit card volume (# of cards)
8%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2020-2021
Credit unions, on the other hand, will increasingly look to credit card volume and interchange as high priorities
in 2022 (Figure 11).
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 20FIGURE 11: Credit Unions’ Payments and Deposits Priorities for 2022
Percentage of Credit Unions Citing Payments or Deposit Type as a High Priority
69%
Debit card interchange income
67%
55%
Consumer checking account volume
63%
59%
Credit card interchange income
51%
54%
Credit card volume (# of cards)
38%
18%
Retail deposits
18%
12%
Small business deposits
15%
13%
Small business deposit account volume
10%
9%
Commercial treasury management income
4%
2022
8%
Large commercial deposits 2021
3%
8%
Large commercial deposit account volume
3%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2020-2021
According to Cornerstone Managing Director Sam Kilmer:
“The competitive value propositions of fintech challengers and megabanks made their mark, tearing into
the consumer and business market and wallet shares of banks and credit unions. The pandemic caught
so many bank and credit union delivery systems off guard and the catch-up exercise created a spike in
the demand for self-service sales delivery tech. The spike led to every consumer and commercial loan
origination system vendor building or acquiring payments origination solutions, point-of-sale solutions,
or both with every major deposit/payments origination system company now also a loan origination
system company. The table stakes and survival guide for digital banking now include a competency
around growing payments and loans relationships, not simply improving user experience.”
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 21TECHNOLOGY PRIORITIES
AND PLANS
TECHNOLOGY PRIORITIES
Banks’ and credit unions’ technologies don’t tend to change too dramatically year-over-year, but one shift worth
noting is the increase in the percentage of financial institutions listing fintech partnerships as an important priority.
The percentages are still relatively small, but the percentage of banks listing partnerships as a priority tripled from
5% in 2021 to 15% in 2022 (Table I). Over the same period, the percentage of credit unions mentioning partnerships
as a priority grew from 9% to 23% (Table J).
TABLE I: Banks’ Technology Priorities, 2021-2022
What are your institution’s most important technology priorities for the coming year?
(select up to three)
2020 2021 2022
Improve customer experience/service delivery 67% 67% 61%
Get more value from tech and vendor relationships 51% 53% 43%
Improve efficiency 36% 41% 41%
Invest in new systems 29% 30% 28%
Increase revenue generation opportunities 17% 25% 23%
Better address fraud and risk management 15% 13% 23%
Invest in infrastructure upgrades 21% 17% 19%
Pursue partnerships with fintech startups NA 5% 15%
Evaluate and possibly replace critical systems 12% 17% 14%
Internal system development and integration 12% 14% 14%
Migrate applications and systems to the cloud 10% 7% 12%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 22TABLE J: Credit Unions’ Technology Priorities, 2021-2022
What are your institution’s most important technology priorities for the coming year?
(select up to three)
2020 2021 2022
Improve efficiency 47% 40% 69%
Get more value from tech and vendor relationships 34% 43% 36%
Improve member experience/service delivery 78% 70% 36%
Invest in new systems 31% 30% 32%
Increase revenue generation opportunities 17% 31% 29%
Pursue partnerships with fintech startups NA 9% 23%
Better address fraud and risk management 13% 16% 18%
Internal system development and integration 21% 15% 15%
Invest in infrastructure upgrades 12% 13% 13%
Evaluate and possibly replace critical systems 5% 15% 12%
Migrate applications and systems to the cloud 16% 12% 11%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 23TECHNOLOGY SPENDING
Roughly a quarter of banks and credit unions will increase their technology spending by more than 10% in 2022
from 2021, with about six in 10 growing their tech budgets by 1% to 10% (Table K).
TABLE K: Banks’ and Credit Unions’ Technology Spending Change
How will your institution’s tech spending change in the upcoming year compared to the prior year?
Banks Credit Unions
2020 2021 2022 2020 2021 2022
Significantly higher (>10% higher) 16% 22% 23% 25% 19% 25%
Somewhat higher (1%-10% higher) 56% 51% 60% 63% 58% 61%
No change 19% 22% 14% 6% 15% 12%
Somewhat lower (1%-10% lower) 9% 5% 2% 5% 5% 2%
Significantly lower (>10% lower) 0% 1% 1% 1% 2% 0%
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2019-2021
EMERGING TECHNOLOGIES
A Cornerstone colleague of mine tells me I shouldn’t list cloud computing and application programming
interfaces (APIs) as “emerging” technologies anymore. He’s probably right, but taking them off the list
would obscure the fact that 41% of banks are still either discussing APIs at the board or exec team level,
or don’t even have APIs on their radar. At 27% of banks, cloud computing is still being discussed or not
on the radar. The comforting news is that 26% of banks plan to invest in or implement cloud computing
in 2022, and 22% plan to deploy APIs.
In addition, if banks’ plans for 2022 come to fruition, the percentage that will have implemented chatbots
will more than double going into 2023, and the percentage of banks that will have implemented machine
learning technologies will have tripled (Table L).
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 24TABLE L: Banks’ Emerging Technologies Plans for 2022
Planning to invest Have discussed
Have already Not on the
and/or implement at board or exec
deployed radar
in 2022 team level
Cloud computing 47% 26% 16% 11%
Application programming interfaces (APIs) 36% 22% 16% 25%
Robotic process automation (RPA) 24% 12% 16% 47%
Chatbots 15% 19% 32% 35%
Machine learning 11% 22% 26% 41%
Voice technologies (e.g., Alexa) 3% 5% 32% 59%
Blockchain 2% 7% 43% 48%
Virtual (or augmented) reality 2% 3% 14% 82%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
Looking at the percentage of banks that have deployed emerging technologies year-over-year shows the rapid
growth in 2021—and planned growth for 2022—of robotic process automation (RPA) and chatbots, (Figure 12).
FIGURE 12: Banks’ Deployment of Emerging Technologies, 2018-2022
Percentage of Banks That Had Deployed Technology Going Into 2018 to 2022
47%
40%
36%
32%
30%
24%
21%
14% 15%
11%
6% 6% 8% 7% 7%
4% 3% 2% 3% 2%
Cloud computing APIs RPA Chatbots Machine learning
2018 2019 2020 2021 2022
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2017-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 25Compared to banks, credit unions have been faster adopters of the list of emerging technologies. If things
go as planned, credit unions’ adoption of machine learning tools, chatbots, RPA, and voice technologies
will grow significantly in 2022 (Table M). The year-over-year view shows the growing adoption of these
technologies (Figure 13).
TABLE M: Credit Unions’ Emerging Technologies Plans for 2022
Planning to invest Have discussed
Have already Not on the
and/or implement at board or exec
deployed radar
in 2022 team level
APIs 61% 16% 16% 8%
Cloud computing 47% 22% 23% 9%
Robotic process automation 23% 24% 26% 27%
Chatbots 22% 28% 36% 15%
Machine learning 13% 29% 38% 21%
Voice technologies (e.g., Alexa) 6% 16% 47% 31%
Blockchain 2% 4% 61% 33%
Virtual (or augmented) reality 1% 3% 26% 70%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
FIGURE 13: Credit Unions’ Deployment of Emerging Technologies, 2018-2022
Percentage of Credit Unions That Had Deployed Technology Going Into 2018 to 2022
61%
57%
53% 53% 51%
47%
12% 22%
18% 18%
13%
9% 9% 10%
6%
2% 1% 3% 2% 3%
0%
APIs Cloud computing RPA Chatbots Machine learning
2018 2019 2020 2021 2022
Source: Cornerstone Advisors surveys of U.S.-based community financial institution executives, 2017-2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 26The interest in chatbots is encouraging. An article in Finextra argues that chatbots have become a
competitive necessity: 2
“The magic behind voice banking isn’t just the convenience of the device; it’s the artificial intelligence that
powers intelligent customer self-service. New enhancements including AI combined with voice biometrics
will unlock a new level of loyalty among financial institution customers.”
I wouldn’t recommend telling that to a bank’s executive team or board of directors, however. Ignore what the
vendors say about “unlocking new levels of loyalty.” There are three requirements driving the need for chatbots
in banking:
1) The need for speed. Abandonment rates for digital product applications in banking are horrendously
high. According to a recent study from Cornerstone Advisors, roughly half of banks surveyed said that in
2020, half of their checking account applications on digital channels were abandoned. The abandonment
rates for unsecured and secured loan applications were even higher.
Even more troublesome is the finding that just a minority of institutions follow up with would-be applicants
within a business day. That’s unacceptable. Banks need chatbots integrated into digital account opening
systems to close that gap. Banks need to make chatbots components of critical business processes (like
account opening)—not just generic sales and service tools.
2) The need for data. Chatbot vendors like to use “providing advice” as a use case for deploying chatbots.
It’s an over-sold justification of chatbots. Personal financial management (PFM) tools have been trying to
provide advice to bank customers for years with little success. The problem isn’t the user interface. That
is, providing advice through a chatbot versus an email or a pop-up in a PFM tab or tool isn’t a silver bullet.
The problem is lack of data. Banks need chatbots to collect data, not display it. Attempts to codify and store
“data” collected through human interactions—and even from clickstream data—is incomplete, generally
inaccessible to other applications that could benefit from the data, and hard to analyze.
3) The need for personalization. Many banks recognize the importance of personalization in customer
interactions. Some, unfortunately, think of it too narrowly, in terms of personalized messages. The
smart banks understand that good personalization requires personalized conversations. They still
wrestle, however, with two things: 1) getting the data to deliver good personalization, and 2) creating
opportunities to have personalized conversations.
NEW SYSTEM SELECTION AND REPLACEMENT
Digital account opening systems have been at the top of the list of planned new selections/replacements for so
many years, I bet if you added up the percentage of financial institutions that planned to choose a new system
in the past five years, you’d find that 200% of institution have chosen a new system.
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 27Digital loan origination systems—for both consumer and commercial customers—will be hot systems for new
selections and replacement among banks in 2022. (Table N).
TABLE N: Banks’ New System Selections/Replacements
Select new or Selected new or
replace in 2022 replaced in 2019-2021
Consumer digital account opening 29% 30%
Consumer digital loan origination system 28% 16%
Commercial/small business digital loan origination system 24% 11%
Commercial/small business digital account opening 23% 12%
Customer relationship management (CRM) 15% 23%
Fraud/BSA/AML 15% 19%
Consumer online banking platform 14% 19%
Person-to-person (P2P) payments 14% 27%
Consumer mobile banking platform 13% 21%
Commercial/small business online banking platform 13% 15%
Commercial/small business mobile banking platform 13% 14%
Call center system 13% 11%
Data analysis/business intelligence 12% 16%
Marketing automation 12% 11%
Debit card processing 10% 14%
Online bill payment 8% 13%
Document imaging/workflow 8% 13%
Core integration/middleware platform 8% 8%
Payments hub 7% 5%
Credit card processing 7% 11%
Core processing system 7% 12%
Mobile bill payment 7% 14%
Card self-service 7% 8%
Interactive teller system 7% 8%
ATM processing 6% 11%
Enterprise risk management 3% 11%
None 15% 19%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 28Credit unions also have consumer digital account opening systems at the top of their planned new selection or
replacement systems for 2022, but unlike the banks, CRM and P2P payment systems are also high on the list (Table O).
TABLE O: Credit Unions’ New System Selections/Replacements
Select new or Selected new or
replace in 2022 replaced in 2019-2021
Consumer digital account opening 32% 30%
Customer relationship management (CRM) 28% 16%
Person-to-person (P2P) payments 26% 30%
Consumer digital loan origination system 21% 25%
Call center system 21% 14%
Consumer online banking platform 16% 30%
Data analysis/business intelligence 15% 20%
Commercial/small business digital loan origination system 14% 5%
Commercial/small business online banking platform 14% 13%
Marketing automation 13% 22%
Consumer mobile banking platform 12% 30%
Commercial/small business mobile banking platform 12% 12%
Online bill payment 11% 19%
Credit card processing 11% 22%
Commercial/small business digital account opening 10% 4%
Payments hub 10% 4%
Card self-service 10% 9%
Interactive teller system 10% 10%
Debit card processing 9% 23%
Enterprise risk management 9% 12%
Document imaging/workflow 8% 13%
Mobile bill payment 6% 18%
Core integration/middleware platform 6% 5%
Fraud/BSA/AML 5% 17%
ATM processing 4% 21%
Core processing system 4% 12%
None 12% 12%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 29DIGITAL TRANSFORMATION
Credit unions got a head start on banks with 16% launching a digital transformation strategy in 2018 or earlier,
versus 9% of banks that had launched a strategy by then. By the end of 2022, just 11% of banks and 4% of credit
unions will not have launched a digital transformation strategy (Figure 14). Overall, 5% of financial institution
executives say that they’ve completed, or are almost done, with their digital transformation strategy (Figure 15).
FIGURE 14: Digital Transformation Strategy Launches
When did your institution launch its digital transformation strategy?
18% 17% 19%
16% 15%
14% 13% 13%
12% 12%
9% 9% 10% 11%
9%
4%
Before 2018 2018 2019 2020 2021 Will launch Will develop Don’t plan to
it in 2022 strategy in 2022 develop one
Banks Credit Unions
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
FIGURE 15: Digital Transformation Strategy Progress
How far along in your digital transformation strategy is your institution?
33% 35%
13% 15%
2% 3%
10% or less 25% through 50% through 75% through Almost done Completed
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 30Progress should be viewed through the lens of when an institution launched its digital transformation strategy,
however. From that perspective, it’s hard to believe that, of institutions that launched a digital transformation
strategy in 2021, 11% are three-quarters done and another 3% are almost done (Table P). That has to be the
fastest “transformation” in the history of mankind.
TABLE P: Digital Transformation Progress by Start Date
How far along in your digital transformation strategy is your institution?
Digital transformation strategy launched in…
2021 2020 2019 2018 Before 2018
10% or less 34% 16% 7% 4% 3%
25% through 37% 38% 34% 38% 18%
50% through 14% 32% 51% 38% 35%
75% through 11% 14% 7% 15% 26%
Almost done 3% 0% 0% 4% 3%
Completed 0% 0% 0% 0% 15%
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
DIGITAL TRANSFORMATION IMPACT
Loan productivity and volume have been the primary beneficiaries of credit unions’ digital transformation
efforts, followed by overall member retention (Figure 16).
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 31FIGURE 16: Impact of Credit Unions’ Digital Transformation Strategies
What impact has your digital transformation strategy had on the following business metrics?
Loan productivity 39% 37% 14% 10%
Loan volume 32% 48% 11% 10%
Overall member retention 24% 48% 12% 17%
Deposit acct open productivity 24% 44% 17% 16%
Operational expenses 14% 36% 18% 14% 18%
Deposit account volume 12% 50% 26% 12%
Other non-interest income 8% 21% 52% 18%
Products per member 7% 42% 32% 19%
Payments-related revenue 5% 31% 49% 16%
Significant (>5% improvement) Moderate (5% improvement) Moderate (VENDOR SUPPORT FOR DIGITAL TRANSFORMATION EFFORTS
Banks and credit unions differ in their perceptions regarding the contributions of their core system vendors to
their digital transformation efforts. Executives from just less than one in five banks (18%) said their core vendors
have made “significant” contributions in contrast to 13% of credit unions (Figure 18). On the other hand, nearly
six in 10 executives from credit unions said their digital platform vendor has significantly contributed to their
transformation compared to just a third of banks (Figure 19).
FIGURE 18: Core System Vendors’ Contributions to Financial Institutions’ Digital Transformation
To what extent is your core system vendor contributing to the digital transformation of your business?
51%
47%
31%
18% 21%
10% 13%
9%
Banks Credit Unions
Significant extent Some extent Little extent No extent
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
FIGURE 19: Digital Platform Vendors’ Contributions to Financial Institutions’ Digital Transformation
To what extent is your digital platform vendor contributing to the digital transformation of your business?
58%
48%
33%
29%
13%
9%
6%
4%
Banks Credit Unions
Significant extent Some extent Little extent No extent
Source: Cornerstone Advisors survey of 300 U.S.-based community financial institution executives, Q4 2021
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 33According to Brad Smith, Partner at Cornerstone Advisors:
“Digital transformation is forcing a core system decision at many financial institutions: Double down on
digital with our core vendor or go with a best-in-class digital platform? Increasingly, many choose to go
best-in-class because they believe the core vendors can’t keep up on innovation, user experience, and
integration. And many are now choosing next-generation, digital-first cores to run their digital banks
with an eye towards eventually converting their legacy bank over to these next-gen cores.”
Survey respondents had no shortage of complaints to share about the core vendors (but we’ll only share
three of them):
“Vendors continue to state that they can do all the magical things, until implementation/integration
begins. Then the finger pointing occurs. Even if you update your core to the newest and best, you still
don’t get all the things you would like, and are dependent on the vendor’s roadmap, while also paying
a good chunk of change.”
“The future is not monolithic platforms that the Big 3 continue to try and shove down our throats.
The shift towards the cloud and open APIs is inevitable. We need core solutions with fully documented
and open REST APIs without needing to spend an additional seven figures on platforms like Mulesoft.
We also need core vendors that are willing to start to put together their own low-code/no-code software
factories so we can easily extend the core. I would rather the core vendors charge me per API call and
make it simple to integrate with fintech partners and have an active list of ‘pre-built’ integrations so I
can more cost effectively go with best-of-breed solutions.”
“While fintechs and other vendors tout that even small FIs can compete digitally, we are handcuffed by
the slowness and unwillingness of core providers to support integrations. And we have found that what’s
in the sales pitch is often impossible to accomplish.”
There’s a clear divergence of perceptions: financial institutions are frustrated with the core providers’ pace
of innovation, but the technology providers counter that with examples of their innovative progress.3
Why the divergence?
According to Steve Williams, President of Cornerstone Advisors:
“The differing perceptions stem from the fact that institutions below $50 billion in assets aren’t really
positioned to ‘go it alone’ and merely consume technology from big players. As the core providers
have grown, it feels like there is less ‘roll up the sleeves’ time between banks and vendors dealing with
thorny issues of execution. The core providers should create a ‘service/execution ecosystem’ that can
grow profitably around their solutions when they don’t have the financial flexibility to invest in the
transformation and executive assistance needed by smaller institutions.”
CORNERSTONE ADVISORS | What’s Going On In Banking 2022: Rebounding from the Revenue Recession 34You can also read
